Hang Seng nosedives as Hong Kong readies a $500B listings bonanza

The Hang Seng index is down by more than 2% today as investors raise questions about the new coronavirus outbreak in China. The index is trading at $23,756, which is lower than last month’s high of $25,311. Other indices in Asia also declined, with the Nikkei 225 falling by more than 3% today.

Hong Kong stocks fall due to virus fears

It was a sea of red in the Hang Seng as investors started to worry about a second wave of the coronavirus pandemic. Over the weekend, China confirmed almost 80 new cases of the illness in Beijing. The new cluster of cases was traced to a seafood market in the city.

Still, the number of coronavirus cases in Hong Kong has been limited. In fact, according to Worldometer, only one new case was confirmed during the weekend. At the same time, the risk is that new cases from the city will start to emerge in the future.

More companies set for Hang Seng listing

The Hang Seng index declined even as Hong Kong prepared to welcome more mainland China listings. This is after the Trump administration started a review on Chinese companies that are listed in the US. The administration’s concern is that most of these companies don’t have quality accounting standards. For example, Luckin Coffee, the Chinese coffee chain that was once valued at more than $12 billion collapsed after it emerged that it was reporting unproven data.

According to CNBC, Chinese companies worth more than $500 billion could relocate to Hong Kong. The report cited data from Jefferies, which identified at least 31 companies listed in the US that could flock to Hong Kong. What’s better? These companies could be attracted by a new change in Hong Kong that allows companies with dual classes.

Top Movers in Hong Kong

Most companies in the Hang Seng are in the red today. Geely Automobile, the Chinese automaker that also owns Volvo, is the worst-performing stock. It declined by more than 4.30%. It was followed by casino operators, Galaxy Entertainment and Sands China whose shares dropped by more than because of the second wave fears. Techtronic Industries, Shenzhou, and Link Real Estate dropped by more than 3.5%.

On the other hand, CK Infrastructure, Hang Seng Bank, Wharf Real Estate, and Bank of China were the worst performers.

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Hang Seng technical outlook

The Hang Seng index is trading at the lowest level since June 2. On the daily chart, the price is slightly below the 50-day and 100-day exponential moving averages. It is also significantly below the 38.2% Fibonacci retracement level. This means that bears are now in control and that they will continue to push the index lower, with the next target being $23,500.

On the flip side, a move above $23,500 will invalidate this prediction. This price is at the 38.2% Fibonacci retracement and along the 38.2% retracement level.

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